Don't pull the plug on our Tube's future, Gordon

Tuesday 20 May 2008 08:25 BST

Left on the platform: millions of Londoners use the Underground every day and carriages are already filled to capacity

Boris Johnson is showing commendable energy in assembling his team. But while the faces at City Hall are changing, I can guarantee one thing that will remain worryingly familiar for Boris - and for Londoners. The modernisation of the Tube and the hulk of the public-private partnership will loom over Johnson's administration, just as it did over Livingstone's. And, sure enough, this week there are already reports of a black hole of billions in the Tube's finances.

Anyone who thought the collapse of Tube maintenance contractor Metronet last year was an end to the scheme's problems had better think again. Metronet was an indicator of only some of the underlying failures of the PPP. More are about to manifest themselves. That poses real dangers for the future of the Tube - and ministers must now face up to them.

There is no doubt that the costs of overhauling the Tube are rising. Tubelines, the remaining contractor since the collapse of Metronet, is about to have its work and costs examined by the PPP "arbiter", a governmentappointed regulator, as we approach the first review of the scheme's contracts in

2010. London Underground expects the overrun to be more than £1 billion for the period 2010-17. A proportionate rise in costs for the defunct Metronet contracts, which will be the direct responsibility of Transport for London, would be £2 billion. So for that period alone, the overall increase in costs will exceed £3 billion.

Long-suffering commuters might well wonder where the money is all going. If you hadn't noticed any improvement on your daily Tube journey, that's because there hasn't been any to speak of. The PPP has patently failed to deliver more than a few station improvements in its first five-and-a-half years, despite expenditure of £7-£8 billion. Indeed, the new Mayor would be well-advised to publicise the realistic likely outcomes from the PPP, rather than continuing with his predecessor's over-enthusiastic "Transforming the Tube" message.

Senior Underground managers do not expect any serious improvement to the system until the middle of the next decade, at best.

The ultimate blame is Gordon Brown's: it was his fatally flawed plan to rebuild the Underground that has saddled taxpayers with 30 years' worth of expensive and unpredictable contracts.

Projects of this kind almost always see their costs rise once they begin. But the PPP contracts are worse because they were signed before anyone involved knew the full - dreadful - condition of the Tube's antique infrastructure. It was envisaged that the additional expenditure needed to replace or renew these socalled "grey" assets would be factored in over three reviews during the 30-year contracts, conducted every seven-andahalf years.

So where will the extra cash come from? The multi-billion scale of the likely excess is such that London's transport fares and council tax could never be expected to cover it. The only way to get the work done on time is for central government to pay.

Yet the PPP is by no means the only massive infrastructure project now weighing down the Treasury. Ministers are committed to starting Crossrail, the vital Heathrow-Stratford link: Transport Secretary Ruth Kelly has said construction will start in 2010, with the first trains running in 2017. If this timetable is to be met, expenditure on the £16 billion project will start within the next 18 months. There are still significant uncertainties about its funding. The economic slowdown will make businesses worried about agreeing to additional payments towards the project. The Government may thus face a call for early guarantees to underpin Crossrail's financing.

More urgent still is the 2012 Olympics. Its costs have already risen from £2.4 billion to £9.3 billion. And there is no doubt that once this year's Beijing Games are over, the London contest will suddenly seem very close. By Christmas, there will be just two-and-a-half years left to get Stratford completed. Half-cleared sites and part-constructed stadiums will be hopelessly vulnerable to cost escalation.

Because there is an unavoidable deadline, the Treasury is vulnerable. Anyone responsible for the Olympics can approach their job in the certain knowledge that if costs skyrocket, they will not be held to account. And after Metronet, we know there is no downside for contractors who fail. Balfour Beatty and Atkins, two of the owners of the failed consortium, have recently been awarded a massive contract to widen and maintain the M25.

The risk for London is that ministers will decide to scale back on funding for the Tube. The Treasury may attempt to compound its earlier mistake - forcing the PPP on London in the first place - by refusing to provide the additional billions that will inevitably now be needed to deliver the promised improvements.

Yet if they do, there is really only one way ahead. Mayor Johnson would be faced with having to order cutbacks in renewals and renovation. A serviceable, modern Tube would be further away than ever, its completion stretching decades ahead.

This cannot be allowed to happen. London has seen its population grow by three-quarters of a million within the past 20 years or so. Mobility has increased, putting demands on the Tube, overground railways, roads and buses. We all know how bad the Tube is. The editor of the Financial Times, Lionel Barber, speaking at an Evening Standard debate earlier this year, summed it up nicely: "The Tube is a disgrace. It's not safe, it's overcrowded, it doesn't work and it's Victorian in every sense of the word."

Competition from the Olympics and Crossrail, which are also Labour's policies, is an expensive reality. But governments find money to deal with politically driven problems. Last week the Chancellor was able to find almost £3 billion to cope with the fallout from the 10p tax problem. Unless he can find a similar amount to keep the Government's promises to London on the Tube, London risks becoming a bad place to live and do business.

It would be quite misguided if the Prime Minister allowed this to happen to the engine of the UK economy. He was the architect of PPP. Now he should guarantee the future of the transport system that millions of Londoners use every day.

Tony Travers is director of the Greater London Group at the London School of Economics.